PARIS (MNI) – In order to lighten the tax burden on business, the
new French government is considering shifting part of social payroll
charges to a broader tax on total earnings (CSG), Labor Minister Michel
Sapin confirmed Wednesday.

With a similar goal, the previous government had voted a hike of
the CSG and a 1.6-point increase in value-added tax rates for this
autumn. The new government rejects this unpopular measure on grounds
that the VAT hike would hit consumers too hard.

“The CSG is a much fairer tax than the VAT which we have just
rescinded,” Sapin said in a radio interview, explaining that it is based
on “revenues of all kinds and particularly revenues on capital.”

“If you lower social payroll taxes and replace them with the CSG,
you will not diminish purchasing power,” he added.

Introduced by the Socialists two decades ago to augment revenues
for the social security system, the CSG has been increased gradually to
over 8% and brought in nearly E90 billion last year, enough to cover
some 20% of social spending.

The labor minister neither confirmed nor denied a report in the
satirical weekly Canard Enchaine that the Finance Ministry is
considering a two-point hike in the CSG or as much as four points if the
economic situation deteriorates further. One point alone would boost
revenues by some E11 billion.

A CSG hike is “one option, but not the solution,” Sapin insisted.
“There are many options.”

While there was general agreement among participants in this week’s
“Great Social Conference” on the need to shift the financing of some
social programs away from payroll taxes to other revenue sources, some
unions like the CGT are opposed to a CSG hike.

During his campaign, President Francois Hollande had alluded to
alternative revenue sources for social spending, such as a tax on CO2
emissions. Others have suggested higher “sin taxes” on alcohol and
tobacco.

Bank of France Governor Christian Noyer spoke Tuesday of the need
to curb “as far as possible” the taxes and social security contributions
that weigh on business.

While employers have demanded urgent action to lower labor costs to
bolster competitiveness, the government intends to give unions and
employers until the middle of next year to submit propositions for new
social spending revenues, Sapin said. A national council on social
financing will be consulted this September.

The government also intends to allow employee representatives to
sit on company salary committees, a move denounced by employers. The
goal is not to allow employees to “block” hikes in pay and perks of
company executives, but rather to assure “transparency” on salary
issues, Sapin explained.

– Paris newsroom +331 4271 5540: ssandelius@marketnews.com

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